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And Their Eyes Were Watching the Sun - Solar will soon be cheaper than coal

SolarCity announced today that it has agreed to acquire solar panel manufacturer Silevo, with the intent of constructing a manufacturing plant capable of producing 1 GW of panels per year, one of the largest on the planet. The release continues, indicating that SolarCity intends to build a follow on plant with a minimum of 10 GW of production capacity.

This is a full about-face for the residential solar provider, as it has historically focused on related services and leasing agreements for solar panels. SolarCity chairman, Elon Musk, has said in the past that the market for panel manufacturing is over-served and the price of panels is quickly approaching the cost to produce them, driving profits way down. The acquisition of a solar panel manufacturer therefore defines a turning point in the company’s history, as they move into the manufacturing space.

Silevo’s technology is a stand-out amongst panel manufacturers, converting between 22-24% of solar energy in an industry with average conversion in the 13-15% range. These panels use a unique three-material composition (n-type crystalline substrate, thin film passivation, and semiconductor oxide) to achieve this boost in efficiency, and approach the 29.4% theoretical limit of a crystalline silicon device. The efficiency of these panels competes with the internal combustion engine in your car, which loses about 75% of the potential energy in gasoline, which is astonishing considering that combustion engine technology is over 100 years older than solar panels, and has many trillion dollar industries behind it.

The energy efficiency of coal-fired plants is around 32.5% and natural gas fired plants 42.4%, so solar has a ways to go to make up lost ground against fossil fuels. Solar also has a lower energy return on energy invested than fossil fuels, from production of panels to their installation and maintenance. However, none of these numbers include environmental damage from burning fossil fuels, making them dubious measures of value at best.

There are two primary scientific arguments against solar, one of which is efficiency, which has climbed exponentially over the past decade. The other is storage, as lithium ions batteries are very expensive to produce and require scarce materials. Other battery technologies are under development, including one that uses algae. Hydrogen is also a possible means of storing energy from renewables.

Political barriers are perhaps more relevant to mass adoption of solar as our primary source of energy, rather than scientific challenges. Fossil fuels receive over 70% of energy subsidies in the US, and benefit from all manner of tax deductions such as depletion allowances. This drives the price of coal, oil, and natural gas down to artificially low levels, making competition from renewables like solar more difficult. Nevertheless, there is a point at which scientific breakthroughs in power generation and storage from renewables will overwhelm even very heavily subsidized fossil fuel prices, making them obsolete.

This acquisition will redefine SolarCity’s path, from installer and service-company to a vertically integrated total solution provider. The market faces oversupply from fairly low efficiency panels, but introducing a clearly superior technology option, from the market leader in residential solar, may just be the disruption needed to rock the landscape.

Comments (2)

How is SolarCity going to avoid becoming another Solyndria? I see a company that provides a service for fee maintenance on home and commercial solar systems. Without seeing the ROI model it is difficult to see how this is good for the customer.